emda funds a range of projects focused on improving the natural and built environment. Such
projects range from land reclamation, servicing sites through provision of infrastructure, and procuring the construction of commercial premises (including innovation infrastructure). emda also undertake a range of environmental improvement projects.
This section sets out the approach that should be used to estimate the economic impacts of these types of projects within programme level evaluations.
Table 5.1 Intervention Types - Place
IEF Sub-Theme Toolkit
Not applicable Acquisition and disposal
Acquisition plus Reclamation Bringing land back into use
Reclamation plus
Public realm Site development: Public Realm
Destination marketing Tourism events
Overseas promotion of the East Midlands to businesses Image, events and tourism
Site development: Visitor attraction
Cross-cutting regeneration interventions Cross-cutting regeneration projects should be treated as a hybrid intervention type and handled using a mixture of relevant methods.
Site development: Commercial Site development: Industrial Site development: Mixed Site development: Housing Other regeneration initiatives
Site developments: Community and sports facilities
5.1 Acquisition and Disposal
Acquisition and disposal projects are projects involving a purchase or a sale of a plot of land, with no associated development activity. These projects should be considered to have no economic impacts or wider benefits.
5.2 Acquisition Plus, Reclamation, Site Servicing and Reclamation Plus
Acquisition plus, reclamation and reclamation plus projects are long-term property investments made by emda. They will typically involve lengthy periods of reclamation activity (and potentially land purchase in the case of acquisition plus). Some projects will involve follow-on development activity (which could be funded by emda, other public sector funders, or the private sector) while others will involve reclaiming land for public amenity use or simply to decontaminate a plot of land.
A logic model setting out how these types of projects will typically generate economic impacts is set out below.
Evaluators will generally encounter two types of project, projects in which development is
complete, and those in which development activity is on-going. Evaluators should be mindful that some work will be needed to determine the end use of sites, particularly where emda’s involvement in the project ended at the reclamation stage, for example.
Figure 5.1 Logic Model – Acquisition Plus, Reclamation, and Reclamation Plus
Displacement, Leakage, and Multiplier Effects Attribution to emda: Percentage of construction activity funded by emda Deadweight: Probability jobs would have existed
in the region in the absence of floorspace Net economic impacts on employment and GVA Acquisition of land
Activities Outputs Outcomes Impacts
Construction of employment floorspace Land reclamation and servicing Firms occupy premises Jobs brought to the East Midlands
5.2.1
Construction Employment and GVAAll property projects will generate a temporary impact on employment and GVA through land reclamation, servicing, and construction activity. Construction impacts should be estimated using the following:
Construction expenditure: Evaluators should establish the total construction expenditure associated with each development, covering land reclamation, servicing and construction. This will generally be set out in the project appraisal documentation and financial claims associated with each project. If developments are incomplete, these costs should be estimated from projected construction costs as set out in project application forms.
Construction expenditure where costs are unknown: In some cases, project documentation may not supply evidence on the construction costs of development. If emda’s involvement in the project solely related to site preparation, then costs for construction of site developments may not be available. Construction costs should be estimated using the estimated quantity of gross floorspace (see below) and estimates of construction cost per square metre for the relevant type of development taken from the Building Cost Information Service maintained by the Royal Institute of Chartered Surveyors (http://www.bcis.co.uk/).
Figure 5.2 Worked Example - Estimating construction costs
emda funded the reclamation of a highly contaminated site, providing £2m of an overall cost of £8m (with remaining funding of £6m coming from other public sector partners). The site was disposed to a private developer, who subsequently constructed an office development of 20,000 square metres of gross employment floorspace. The cost of this development was not available from any documentation from the project. However, information held by RICS indicated a benchmark cost of £600 per square metre for office space, allowing us to estimate an overall construction cost of £12m (£600 x 20,000). We therefore estimate the overall construction cost at £20m, of which emda funded £2m (10%).
Construction employment years: If primary evidence on the number of construction workers involved in construction activity is available, this should be used. Otherwise, overall construction employment should be estimated on the basis of the ratio of construction turnover to
employment in the East Midlands. This can be estimated by dividing construction turnover in the East Midlands (sourced from the Annual Business Inquiry) by the number of employees in the construction sector (employees from the Annual Business Inquiry and self employment from the Annual Population Survey). In 2008, this ratio was equal to £xx,xxx. Estimated construction costs should be divided by this ratio to estimate the overall number of construction employment years associated with the development.
Construction employment years = Construction costs / Ratio of turnover to employment in the
construction sector
A worked example is set out below:
Figure 5.3 Worked Example – Estimating construction employment years
National survey evidence suggests a turnover per worker ratio of £100,000 in the construction sector in the East Midlands. Applying this to overall construction costs of £20m, we estimate total construction employment years of 200 (£20m / £100,000).
Construction GVA: Construction GVA should be estimated on the basis of construction turnover to GVA construction sector (which can be estimated on the basis of information from the ABI and the APS).
Construction GVA = Construction expenditure x Ratio of turnover to GVA in the construction
sector
A worked example is set out below.
Figure 5.4 Worked Example – Estimating construction GVA
National survey evidence suggests the ratio of construction turnover to GVA is x percent. Applying this ratio the £20m construction cost we estimate total gross construction GVA at £x.
To estimate net additional construction employment years and GVA, evaluators should consider the following:
Attribution to emda: In line with national recommendation, impacts should be attributed to
emda on the basis of the Agency's share of total public expenditure on the project. This should
exclude follow-on private sector investment.
Attribution to emda = Total emda funding / Total public sector funding
A worked example is set out below.
Figure 5.5 Worked Example – Attribution to emda
In the example above, total public sector funding totalled £8m, with emda contributions totalling £2m. This gives a value for attribution to emda of 0.25 (£2m / £8m).
Crowding In / Out: The extent of crowding in or out (where public sector investment
discourages or encourages similar alternative schemes to come forward) should be estimated for each development using project documentation, qualitative interviews with project managers and developers, and contextual evidence. In general, emda will be responding to market failures in property markets – for example, developers may face abnormal costs in developing sites or have low confidence in areas with latent demand, so it is anticipated that levels of crowding out are likely to be low. Evaluators should estimate the percentage of gross floorspace (in terms of the development in question) that did not come forward on other developments (or was
encouraged) as a result of investment in the project, and any assumptions used should be justified.
Leakage and displacement: A survey of construction firms will not be possible, and it will not be possible to establish leakage or displacement. Evaluators should assume that contracts will be satisfied mainly by firms employing workers that live in the East Midlands, and that demand will be satisfied within the regional capacity of the sector, so that leakage and displacement are effectively zero.
Multiplier effects: A regional construction multiplier effect of 1.51 should be applied in line with Table 3.5, page 40.
Net additional construction GVA and employment years: Net additional construction GVA and employment should be estimated using values for attribution to emda, crowding out, and multiplier effects using the following:
Net additional construction employment years = Construction years x Attribution to emda x (1 -
Net additional construction GVA = Construction GVA x Attribution to emda x (1 - Crowding out)
x Multiplier effects
A worked example is set out below:
Figure 5.6 Worked Example – Net Additional Construction Impacts
Overall construction employment years associated with the emda funded development totalled 200 with an associated GVA of £10m. 25 percent of public sector expenditure on the project was funded by emda. Evaluators found evidence suggested the potential for some crowding out and a value of 10 percent for crowding out was assumed.
Net additional construction years were estimated at 68 (200 x 0.25 x (1 – 0.1) x 1.51) and net additional construction GVA at £3.4m (£10m x 0.25 x (1 – 0.1) x 1.51).
5.2.2
Gross Economic OutcomesWhere projects have involved follow-on commercial development, evaluators should estimate the gross economic outcomes of the project – namely, the employment that was accommodated by floorspace funded by emda. For developments that do not involve any follow-on development, or for sites where there is no
employment floorspace (residential developments or public amenity space), evaluators should estimate construction GVA and
employment only.
The process for estimating the gross economic outcomes of
development activity will depend on the information available to the evaluator:
Employment known: In some cases, the total number of employees accommodated by developments may be known. Gross jobs accommodated can be estimated by applying the values for ‘attribution to emda’ and crowding out derived for construction impacts to the total number of employees accommodated
Figure 5.7 Worked Example – Gross jobs accommodated where employment known
Gross jobs accommodated = Total employment x (1 - Crowding out) x Attribution to emda
Project documentation and interviews suggested that the emda funded development
accommodated 80 workers. There was no evidence for any crowding out. emda funding accounted for 25 percent of total public sector spending on the project, so we estimate gross jobs
accommodated at 20 (80 x (1 – 0) x 0.25).
Floorspace known, employment unknown: In most cases, evaluators will know the quantity of floorspace created (or which will be created) through developments but not the number of employees accommodated by developments. In these cases, the evaluator should assume an employment density based on the end use of the site based on the table below. Evaluators
Total floorspace
Floorspace attributable to emda
Wo rk er s G ros s e m p lo ym e nt
should also consider occupancy rates, which if unavailable should be assumed to be 90 percent. This value can be combined with total floorspace, the estimated attribution to emda, and estimated crowding out, to estimate gross employment accommodated
Table 5.2 Employment Densities
Development Type Employment Density (square metres per
employee) Industrial 34 Commercial 19 Retail 20 Warehousing 50 Business Park 19 Leisure 40
Source: Guidance Note on Employment Densities, English Partnerships, Gross Internal Area A worked example is set out below.
Figure 5.8 Worked Example – Gross jobs accommodated where floorspace known
Gross jobs accommodated = Total floorspace x (1 - Crowding out) x Attribution to emda /
Employment density x Occupancy Rate
Project documentation and interviews suggested that the emda funded development created 20,000 square metres of retail floorspace. There was no evidence for any crowding out, and occupancy rates were estimated at 90 percent. emda funding accounted for 25 percent of total public sector spending on the project, so we estimate gross jobs accommodated at 225 (20,000 x (1 – 0) x 0.25 / 20 x 0.9).
Plot size known, floorspace unknown, employment unknown: In a minority of cases, the evaluator will know the plot size but will not know the either the floorspace or the employment accommodated by developments. In these cases, the quantity of floorspace should be
estimated using an appropriate value from the table below. Gross jobs accommodated can be estimated using the same process as outlined above in the case where only floorspace is known.
Table 5.3 Plot Ratios
Development Type Plot Ratio
Industrial / Warehousing 1:1 or 50%
Commercial Office 1.5:1 or 60%
Commercial Office in Town Centre 2:1 or 66%
Commercial Office in Major Town Centre 3:1 or 75%
Source: Ealing Borough Council, Supplementary Planning Guidance (DN – to update with East Midlands specific source, London guidance likely to give too high values)
A worked example is set out below:
Figure 5.9 Worked Example – Gross jobs accommodated where floorspace is unknown
Gross jobs accommodated = Total plot size x Plot ratio x (1 - Crowding out) x Attribution to emda
/ Employment density x Occupancy Rate
emda were involved in reclaiming a site of the size of 40,000 square metres. The site was
subsequently turned into industrial units by a developer, although no evidence can be found as to the size of this development. Using a plot ratio of 50 percent, a total of 20,000 square metres of industrial floorspace was estimated to be created (40,000 x 0.5). emda funded 50 percent of the overall public sector cost of the project, but no evidence is found for crowding out and evidence suggests that the building is fully occupied, so assuming an employment density of 34 square metres per employee we estimate gross jobs accommodated of 294 (40,000 x 0.5 x (1 – 0) x 0.5 / 34 x 1 = 294).
5.2.3
Gross economic outcomes – productivityOne of the effects of providing floorspace is potentially to enable occupants to improve their productivity via the availability of improved floorspace. Evaluators should estimate gross changes in GVA due to productivity gains on the basis of surveys of occupants, following the approach outlined in section 3.4.2 (page 29). If developments are not complete, evaluators should not attempt to estimate future potential productivity gains.
Gross gains in GVA will need to be estimated at the level of development. Evaluators should gross up results on the basis of the percentage of estimated employment accommodated by firms
covered by firms in the beneficiary survey. A worked example is set out below.
Figure 5.10 Worked Example – Gross GVA due to productivity gains
Gross GVA due to productivity gains = Total GVA reported by occupants surveyed / Percentage
of employment accommodated covered by the beneficiary survey
A beneficiary survey of occupants of an emda funded development reported that they their (in total) productivity by £50,000. The total employment of firms in the survey was 25, and the development was estimated to accommodate 100 firms. Total gross GVA due to productivity gains was
estimated as £200,000 (£50,000 / 0.25).
5.2.4
DeadweightThe key aspect of deadweight that should be addressed by evaluators is the extent to which the jobs accommodated by developments would have existed in the absence of developments. Surveys of firms occupying emda funded developments should be undertaken to establish the percentage of employment that is additional to the region.
New firms Relocations from outside the East Midlands Relocations from within The East Midlands to Relocations from within the East Midlands to
There are potentially four types of occupant to consider: new firms; relocations from within the East Midlands to expand, relocations from within the East Midlands to downsize or remain the same size, or relocations from outside the region. The extent to which occupants (and associated employment and GVA) of emda funded developments are additional to the region depends largely on what they would have done in the absence of the floorspace.
To identify how far beneficiaries fit into the above four categories, beneficiary surveys should include the following question:
Table 5.4 Categorising Occupants
Response to 'Which of the following best describes the status of business when you occupied this premises?’
A new firm occupying its first premises
The firm relocated from a premises located outside the East Midlands The firm relocated from another location in the East Midlands to expand
The firm relocated from another location in the East Midlands to survive or remain the same size
To assess the additionality of employment associated with emda funded developments, beneficiary surveys should identify beneficiaries employment levels both at the time of the survey and before they occupied the emda funded premises, and what they would have done in the absence of the property (responses outlined in the table below). This evidence should be used to determine the proportion of jobs accommodated by developments represent gross additional jobs created or safeguarded (i.e. net of deadweight).
Table 5.5 Probability beneficiaries would have been present in the region in the absence of the development
Response to 'If the premises you occupy was not available, what do you think you would have done?'
Relocated / located to another similar premises in the East Midlands Relocated / located to another similar premises outside the East Midlands Remained within the premises occupied previously
Ceased trading
Would not have started my business
These responses should be interpreted differently for each different type of firm, as set out below.
1: New firms
New firms (and there associated employment) are additional to the region if they report that they would have located to another premises outside the East Midlands or would not have started their
business if the premises were not available. Where employment is additional to the region, these should be treated as jobs created (rather than jobs safeguarded).
2: Firms relocating from outside the East Midlands
The employment associated with firms relocating from outside the East Midlands should only be treated as additional if they report that they would have relocated to another similar location outside the East Midlands or would have remained in the premises they occupied previously. Where impacts are additional, all employment associated with the firm should be treated as jobs created.
3: Firms relocating from within the East Midlands to expand
The employment associated with firms relocating from within the East Midlands to expand should be treated as additional to the region if they report that they would have relocated to another location outside the region or would have ceased trading. In these cases, the number of
employees reported by firms before they moved premises should be treated as jobs safeguarded, while any additional employees taken on should be treated as jobs safeguarded.
4: Firms relocating from within the East Midlands to survive / remain the same size
As with firms relocating to expand, the employment associated with firms relocating from within the East Midlands should be treated as additional to the region if they report that they would have relocated to another location outside the region or would have ceased trading. However, all employment should be treated as jobs safeguarded.
Additionality of productivity outcomes
In addition to assessing the additionality of employment and GVA created by firms, evaluators should also assess how far GVA due to productivity gains was due relocation to premises. An assessment of the additionality of productivity gains should follow the principles outlined in section 4.1.2 (page 62), using the responses outlined in the table below. Evaluators should estimate the additionality of productivity outcomes using an average across beneficiary responses (weighted by employment size).
Table 5.6 Additionality of productivity improvements
Relevant Survey Questions Response Probability productivity benefits would have occurred in the absence of support
No 0.00
Did the moving to new premises result in any productivity
improvements? Yes -
Definitely not 1.00
Unlikely 0.75
(If yes) How likely is that you would have seen these
productivity gains if you had not
Likely 0.25
Definitely not 0.00
5.2.5
Gross additional jobs created and safeguardedThe process outlined above will enable evaluators to estimate the percentage of overall
employment accommodated that represents gross additional jobs created or safeguarded. This should be applied to gross employment accommodated to estimate the overall number of gross additional jobs created or safeguarded.
If specific survey evidence is unavailable (for example, if construction work has not been
completed) then evaluators should assume similar values for additionality to those established for